Enhancing intra-regional trade in sub-saharan Africa: an exploration of threshold effects and the intermediation role of FDI and tourism

David Aboagye Danquah () and Ibrahim Mohammed ()
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David Aboagye Danquah: University of Professional Studies
Ibrahim Mohammed: The Hong Kong Polytechnic University

SN Business & Economics, 2025, vol. 5, issue 1, 1-23

Abstract: Abstract This study determined the Foreign Direct Investment (FDI) threshold level necessary for international tourism to significantly enhance intra-regional trade in Africa. The study employed the system Generalised Method of Moment (GMM) and dynamic threshold estimation technique on annual panel data from 48 countries in sub-Saharan Africa from 1990 to 2023. The study revealed that while international tourism negatively impacts intra-trade, FDI significantly enhances intra-regional trade in Sub-Saharan Africa. Moreover, the interaction between tourism development and FDI, with a significant coefficient of 0.0248%, suggests a complementary role of the two variables in improving intra-trade performance. Finally, the study identified a significant FDI threshold of 7.723%, which is necessary for tourism to positively influence intra-regional trade. The study recommends that policymakers implement targeted support programs for trade-related investments, create a favourable environment for attracting and retaining FDI, integrate tourism development with FDI strategies, and aim to surpass the FDI threshold to maximize the benefits of tourism on trade.

Keywords: Foreign Direct Investment; Intra-Trade; Tourism Development; Africa; Threshold (search for similar items in EconPapers)
JEL-codes: C33 F18 Z32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-024-00780-w

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